I posted part one of this very valuable discussion yesterday.
Yesterday I wrote that solar PV and other distributed-energy technologies pose a radical threat to U.S. power utilities and the centralized business model they’ve operated under for the last century. This is, I hasten to add, according to the utilities themselves.
So what should be done about it?
It’s complicated. On one hand, more distributed renewable energy is a good thing. It reduces carbon emissions, increases resilience, stimulates the growth of new industries with new jobs, and gives Americans a taste of energy democracy.
On the other hand, it just won’t do to have utilities view the spread of rooftop solar PV as an existential threat. Whatever you think of them, utilities still have tons of political power. If they want to slow the spread of distributed energy, they can. A lot.
So let’s look at their complaint. But one key thing to keep in mind as we do is that the utilities’ primary objective, the impetus behind the recent report from their trade group, Edison Electric Institute, is toprotect their business model and their profits. That’s what business groups do.
Which is fine. EEI’s concern is what it should be: how the industry and regulators can act quickly in the short term to protect utilities, to give them room to develop a long-term strategy for grappling with the rapid spread of distributed energy. However, it’s not clear why protecting utility shareholders ought to outrank other social goals. EEI’s recommendations should be taken with a grain of salt.
Here’s the problem, as EEI sees it: Utility customers are being subsidized in various ways to install solar panels — tax credits, state renewable energy standards, feed-in tariffs, net metering, what have you. Those are the explicit subsidies. But there’s also an implicit subsidy. As solar customers pay less to the utility, they contribute less to the maintenance of the electric grid and other utility “fixed” assets. The utility’s fixed costs (as opposed to the variable costs of fuel and electricity) must be recovered from the other ratepayers. “This type of lost revenue recovery drives up the prices of those non-participating customers,” EEI writes, “and creates the environment for ongoing loss of additional customers as the system cost is transferred to a smaller and smaller base of remaining customers.”
Continue reading “Can We Have Solar Energy and Utilities, Too?”
